Japanese Candles are a method of displaying price movement in financial markets, commonly used in cryptocurrency analysis. Each candle represents price movement over a certain time period (such as an hour or a day). Here are the details:
1. Components of a Japanese Candle:
Each candle consists of:
Body: The difference between Opening and Closing Price.
Upper Wick/Shadow: The highest price reached.
Lower Wick/Shadow: The lowest price reached.
Color:
Bullish Candle (Green): Closing above Opening.
Bearish Candle (Red): Closing below Opening.
2. Important Candle Patterns and Their Significance:
Pattern Shape Interpretation
Strong Bullish Candle Large Green Body Strong Buying Pressure, Possibility of Continued Rise
Strong Bearish Candle Large Red Body Strong Selling Pressure, Possibility of Continued Decline
Doji Very Small Body + Long Wicks Market Confusion, Possibility of Trend Reversal
Hammer Small Body + Long Lower Wick Appears After Decline, Possibility of Upcoming Rise
Hanging Man Like Hammer but After Rise Possibility of Beginning Decline
Shooting Star Small Body + Long Upper Wick After Rise, Indicator of Beginning Decline
Bullish Engulfing Green Candle Engulfing Previous Red Candle Possibility of Bullish Reversal
Bearish Engulfing Red Candle Engulfing Previous Green Candle Possibility of Bearish Reversal
3. Tips for Using Candles:
Do not rely on a single candle only — Observe the overall context.
Combining it with indicators like RSI or MACD enhances accuracy.
Its strength shows more in larger time frames (Hourly, 4 Hours, or Daily).